- Exemptions, Tax Incentives and Exclusions
- Reassessment Exclusions
- Parent to Child Exclusion
Parent to Child Exclusion
Proposition 13 passed by the voters in June 1978 established base year values for all properties in California. Changing ownership of property or doing new construction also sets base year values. As time went on and property values increased, base year values established in later years were substantially higher than earlier base year values. People who bought or built property understood that their taxes would be higher than the prior owner’s taxes, but children who inherited real property from their parents, which is also a change of ownership, also saw their taxes double or triple because the parents’ lower base year value disappeared.
Proposition 58 and Proposition 19
In order to encourage continuing family ownership of property California voters passed Proposition 58 in November 1986 allowing certain transfers between parents and children without reassessment. In November 2020, the voters passed Proposition 19 which severely restricted the parent to child exclusion. First, a child has to move in and occupy the principal residence of the parent in order to qualify for the exclusion. Second, even if the child moves into the principal residence, the parent’s base year value will be adjusted upward if the full market value of the principal residence on the day of the transfer exceeds the factored base year value by more than $1 Million. Third, there is no parent to child exclusion for properties that are not principal residences except for family farms.
Example: Mr. and Mrs. Jones transfer their principal residence to their daughter who makes the property her principal residence. The full market value of the principal residence on the date of transfer is $2.5 Million. The factored base year value of the principal residence is $750,000. The daughter’s adjusted base year value will be $1.5 Million* saving about $10,000 in property taxes annually as opposed to the property being reassessed at the $2.5 Million full market value.
Note*: $2.5 Million minus ($750,000 plus $1 Million) = $750,000 which is added to the parents’ factored base year value of $750,000 for a total of $1.5 Million.
Application for Exclusion From Reassessment
To qualify, the parents and children must file a Claim for Exclusion from Reassessment with our office. Only property held by parents or children or their revocable or irrevocable trusts are eligible for this exclusion. Legal entities such as partnerships, corporations, and limited liability companies are not parents. Please note that a grandparent cannot transfer directly to a grandchild unless all the parents of that grandchild are deceased. A two-step process through the intervening generation ([grand]parent to parent to [grand]child) is permitted but may have income, gift, and estate tax consequences.
Should you have any questions, please contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707.253.4459 or by emailing John Tuteur. More articles can be found on the Assessor's page.